The Advantage of Knowing the Business Environment - Research Paper Example

Introduction Globalization is a term that denotes worldwide events. It encompasses the political, social, economic, and technological activities that affect the internal and external structure of a business. Economists have different perspectives on the forces that triggered globalization. Others attest that information technology has been the driving force of economic development, while reformist asserts that government contributes to changes in the environment through their monetary and fiscal policy. Government legislates regulation that the companies are mandated to follow such as labor codes, and health and sanitation; hence, the firms’ movement is restricted. Moreover, they are subjected to international and local policies that may alter their business strategies. Although globalization has been associated with the trends in technological innovation, it also signifies the penetration of an international firm to local markets. Business sectors that aim to expand their market size are governed by the political, economic, and social norms. Therefore, the view of Keynesian on the role of government is significant in studying the market. Government shapes the operation of a globalized firm. However, with the integration of the internet, global marketers have reached their prospect consumers where no boundaries are set. An example of a global firm is KFC, an American fast-food sector that successfully integrates the Chinese market. The main thrust of this paper is to analyze the approach used by KFC in introducing their global products to China. Moreover, it discusses the importance of market research in an attempt to understand the business environment. Importance of Market Research Firms venture in a new market to expand its territory and increase sales. However, before the decision-making process, there are considerations that firms must review. Marketing research is the strategy used by firms to gather relevant information as their basis in devising a marketing plan. Planning is important when companies want to introduce a new product, or invest in a local market. It includes information about the competitors, products, and customers. The purpose of marketing research is to gain competitive advantage and reduce uncertainty. Competitive Advantage Marketing research aims to study the environment of a particular area. The environment contains factors that can affect the business operation. In studying the local market, STEP analysis is employed. STEP stands for social, technological, economic, and political factors that are relevant in determining the success of a company. Social factors refer to the demographics (e.g. age, gender, and education), class, values, and etc. To effectively capture the target market of KFC, they must research on the lifestyle, values, and other social attributes necessary in formulating a marketing strategy. The target markets of KFC are younger generation, since they are opened for foreign influence compared to older people. Moreover, technology is utilized in selling products and services. For an instance, KFC must determine the number of households with online access and their pattern of using the internet to become their basis of choosing a medium for adverts. On the one hand, the economic and political factors are relevant in shaping the marketing strategy of a firm. They are concerned with the macro and micro economics that may affect the stability of a company. Thus, the information gathered are compiled and studied to construct a comprehensive plan in winning the market. Gould (2008, p.4) suggests another method of ensuring the company’s success is through SWOT analysis. This analysis is centered on the strengths, weaknesses, opportunities and threats in the external and internal environment of firms. The company enables to know their weaknesses and devise a ‘defensive’ strategy to counteract the ‘offensive’ strategy of the competitors. Thus, if the competitors strike, the company can prepare for a defensive strategy to weaken the extent of impact. Reduce Uncertainty Knowing the structure of the environment reduces uncertainty (Wienclaw, 2009). Uncertainty is part of doing business, especially to global marketers where foreign products are sold to local markets. Hence, the company acknowledges the risks accompanied of new product introduction. To lessen the threats, company applies extensive analysis of the market structure. The company evaluates the needs and wants of customers, although the information gathered is not hundred percent accurate. It guides the marketers toward efficient and effective decision- making, enough measure to remain viable in the business. KFC successfully launched their product due to their investment in marketing research. They possess knowledge management that influences their idea on the location of business, the type of service that Chinese prefers, and their food choices. Applied Strategy of KFC in China Product Innovation, Variation, and Adaptation Research contributes to the development of a new product because companies based on the demographics, or structure of a certain market in making strategic decisions. Product innovation is a complex process; hence, marketers analyze and investigate the factors that may affect their marketing strategy. They investigate on the socio- cultural factors that entail the deviating customers’ preferences. Witkowski, et al. (2003, p.76) affirm that global marketers have acknowledged the different wants, needs, and preferences of customers in other countries; hence, they adapted or localized products and services. KFC has implemented this principle which makes their company successful in marketing their products. The company introduces product variation that matches the taste of Chinese in all regions. Based on the research, Chinese dislikes junk foods, or high calories foods because of the cultural belief on being healthy. Thus, culture has a strong link with the preferences of a person. Cleveland, et al. (2011, p.247) agree that historical, geographic, and cultural aspects are affecting the food inclination of Chinese, which is associated to local tradition. Furthermore, Dong and Liu (2010, p.224) assert that the ability of an individual to decide on matters is dependent on the culture, or values that they adhere to. That’s why KFC does not only alter their product, but also change their managerial disposition. The company allows employees to skip from work, provided that they inform the manager. This scenario is quite different in the US context because immediate firing is the consequence of such action. Thus, US values money more than relationship, whereas Chinese follows the collectivist attitude. Chinese gives importance to their employees, respects the custom, displays good conducts, and lives in social accord, while employees are assumed to be a good follower (Dong & Liu, 2010, p.229). In terms of leadership, the Chinese culture is negotiable, although the culture accepts the high power distance, or disparity exists in their country. KFC aims for the younger generations because children and adolescents are more adaptive to changes in culture and tradition compared to the older generation. The marketing strategy of KFC will not affect the older people because they are tied to their social tradition. Furthermore, children often decide and influence their parents in choosing a place to eat. Hence, there is no doubt of the success of KFC’s marketing strategy. Cleveland, et al. (2011, p.245) add that blending the characteristics of product to the customers’ attitudes, culture, and psychographic division are antecedents to marketing success. Global marketers have discerned the value of studying consumer behavior. Product Standardization Vs Product Adaptation In retrospect, marketers believe that market segmentation produces market diversification because of the alteration in products, or services to meet the demand of certain demographics. However, Cannon and Yaprak (2011, pp.229+) claim that studies have shown the ineffectiveness of product standardization in the international arena. In the earlier discussion, consumers in different nations vary in their functional needs, and when there are similarities in the demands, they are assumed to leave traditions behind to consume other product choices. Another study discovered that country consumers prefer product adaptation because of their dependency on the culture, habit, or tradition that they are used to. Thus, the tendency of local customers is to reject standardized products because of their unfamiliarity. Customer’s Perception American’s fast food has a negative implication to the customers because of the corporate issues associated with health and environment. KFC adapted their products and service on the Chinese market because of the need to change the negative impression. Witkowski, et al. (2003, p.76) emphasize that establishing a positive image to the minds of local consumers is the main objective of marketing management. They have modified their service and products to attract local customers in accepting foreign foods. Through modification, KFC has attained high revenue. Furthermore, the authors conducted a comparable survey on the impressions of American and Chinese on the brand identity of KFC. The study learned that younger Chinese is more favorable in KFC than American consumers. It may be the cause of being socially responsible of KFC in China. The company offers a good dining experience with the presentation of modernity, service, and clean amenities. Moreover, KFC engages in corporate social responsibility (CSR) by offering healthy foods and encouraging youth to exercise. These characteristics of China-based fast food are not practiced in USA because KFC is already an established brand for Americans. Conclusion The success of KFC in China relies on the approach used to gain competitive advantage and reduce uncertainty. Investing in research and development is a process of knowing your environment that guides global marketers in their decisions. It leads to product adaptation, or variation that is based on the values and culture of Chinese people. Furthermore, the company changed their global impression by implying that KFC is socially responsible through promoting healthy diet, and exercise. References Cannon, H.M. & Yaprak, A., 2011. A dynamic framework for understanding cross-national segmentation. International Marketing Review, 28 (3), pp.229-243. Cleveland, M. Papadopoulos, N. & Laroche, M., 2011. Identity, demographics, and consumers behaviors. International Marketing Review, 28 (3), pp.244-266. Dong, K. & Liu, Y., 2010. Cross-cultural management in China. International Journal, 17 (3), pp.223-243. Gould, M., 2008. Sustainable competitive advantage. Research Starters Business, pp. 1-7. Wienclaw, R., 2009. Product innovation. Research Starters Business, pp.1-6. Witkowski, T.H. Ma, Y. Beach, L. & Zheng, D., 2003. Cross-cultural influences on brand identity impressions: KFC in China and the United States. Asia Pacific Journal of Marketing and Logistics, 15 (1), pp.74-88. Read More